On Monday, the SEC shut down the trading of close to 400 microcap stocks. The Security and Exchange Commission launched their biggest effort to date to crack fraud before it takes place through the use of shell companies.
The SEC is stepping up its efforts in stopping the shares of shell companies from being saved by fraudsters who could eventually use them later to perpetrate schemes to rip off unsuspecting investors. Shell companies are used to lure the unsuspecting investor who thinks that just because the company is listed with a ticker symbol and has a number of positive press releases it is legitimate.
The SEC said that unless they do something like they did on Monday and suspend trading formally, there remains the risk that shares will be purchased and set up as a shell business. By suspending the trading on the 379 stocks, the regulatory agency has shut down possible pump and dump schemes before they have a chance to occur.
The move made by the SEC combats the criticism it has received saying it does not move quick enough. The pump and dump cases have been receiving more focus from the SEC, as they feel going after the shell company is a way to go directly to the source.
Prior to Monday’s shuttering of 379 stocks, the largest one-day closing by the SEC was 39 companies in 2005. The OTC Pink System is where all 379 stocks were trading and there are close to 3,000 companies still trading on that system that provide no information to the potential investor.
